Companies raising share prices by 40% are on the market. Considering them for your investment list?
In an unexpected move, two tech companies, Tracxn Technology and Tanla Platforms, are launching share buybacks at significant premiums despite recent stock declines and soft earnings. This strategic move is aimed at signaling undervaluation, reinforcing market confidence, returning cash efficiently to shareholders, and highlighting faith in long-term business fundamentals.
Tracxn Technology, a company that tracks and curates data on startups, is buying back shares at ₹75 per share, about 40% above its current market price of ₹55. The company's stock has fallen over 53% in the past 18 months. Similarly, Tanla Platforms, a leading player in the communications platform-as-a-service (CPaaS) business, is conducting buybacks at a premium price of ₹875 per share, representing a 36% premium over its current level.
The key reasons for these buybacks at a premium include signaling confidence in future prospects, returning cash to shareholders selectively, counteracting promoter share selling and market volatility, and reflecting strategic capital deployment.
By signaling confidence in their future prospects, both companies appear confident that their shares are undervalued relative to their fundamental business potential. Tracxn, with its AI-driven SaaS platform providing high-value data on startups and investors, suggests potential long-term value beyond current market perception. Tanla Platforms, with its 30% market share in the CPaaS business and 35% market share in data security, privacy, spam, and scam detection, also indicates strong business fundamentals.
Buybacks can return capital more efficiently than dividends, especially when management believes shares are trading below intrinsic value. By purchasing their own shares, these companies are enhancing shareholder value through reduced share count and increased earnings per share over time.
Amid a backdrop of heavy insider and promoter selling and broader market uncertainty, these buybacks serve as a positive signal to the market to support share price and stabilize investor confidence. The premium buybacks demonstrate the companies' belief in their core operations and growth outlook, which can help to counteract the negative sentiment caused by promoter share selling and market volatility.
Both firms, operating in technology-driven, competitive sectors like cloud communications (Tanla) and startup data analytics (Tracxn), may see buybacks as a strategic way to deploy excess cash, optimize capital structure, and reinforce market valuation.
In summary, the premium buybacks by Tracxn Technology and Tanla Platforms reflect a strategic move to signal undervaluation, reinforce market confidence, return cash efficiently to shareholders, and highlight faith in long-term business fundamentals. This move comes at a time when promoter holdings in listed companies are at a seven-quarter low of 50.1% in Q4FY25, and Tracxn's revenue rose just 2% to ₹845 million in FY25, with a net loss of ₹95 million. Despite these challenges, these tech companies are demonstrating their confidence in their future prospects and the value they bring to their shareholders.
[1] Source: Business Standard [2] Source: Economic Times [3] Source: Mint [4] Source: Livemint
- Tracxn Technology and Tanla Platforms, despite recent stock declines and soft earnings, have initiated share buybacks at significant premiums, signaling their faith in long-term business fundamentals and the potential undervaluation of their shares.
- By purchasing their own shares, these tech companies aim to return capital more efficiently than dividends, enhance shareholder value through reduced share count, and increase earnings per share over time.
- Premium buybacks not only help counteract promoter share selling and market volatility but also serve as a positive signal to the market, supporting the share price and stabilizing investor confidence.
- In a competitive technology landscape, these companies view buybacks as a strategic way to deploy excess cash, optimize capital structure, and reinforce market valuation.
- Amid broader market uncertainty and a seven-quarter low of promoter holdings in Q4FY25, these tech firms are demonstrating their confidence in their future prospects and the value they bring to their shareholders, as evidenced by their premium buybacks.
